In collector lawsuit, what happens to 'costs' during BK?

[bornfree2]

If debtor is thrown into a lawsuit dispute, the creditor can demand costs for the suit. This could be attorney fees but also all costs along the way (i think).

So the case proceeds and both sides do the discovery process. Costs start to add up. Then debtor decides to execute right to file BK and apply automatic stay.

Now the case is on pause. And since there is no loosing judgement, there has been no costs and damages awarded yet. If the BK is successfully and debts discharged, then those costs gets washed away correct?

But if the BK is not successful , then the lawsuit resumes correct? The debtor is then in the worst position possible because the only way is to fight out of it. But fighting out of it means increase in costs and attorney fees. And now BK is no longer an option.

Am I understanding the worst case scenarios here? Trying to determine when to file a BK...early during a lawsuit, or after its judgement so as to properly clear out its total possible costs

(and yes consulting an attorney with this question is on the list of many many todos)

[justbroke]

Bankruptcy removes the debtors legal responsibility to pay any debt that is discharged. Therefore, anything related to a dischargeable lawsuit, including all fees, is discharged. There's nothing special here. The debt is simply discharged and since the debt would include any cost of collection, then any fees related to the collection of that debt are also summarily discharged.

If your bankruptcy does not receive a discharge, then you are subject to underlying State non-bankruptcy and contract law.

If doesn't matter when you file the bankruptcy as it discharges all debts that arose as of the date of filing. it doesn't matter that the debt has subsequent related costs. The debt is summarily discharged (period). This is why most creditors don't fight the discharge because their costs would not be recoverable if the debt is discharged.

If what you wrote in your last paragraph was the case, creditors could just simply file stupid things so that their costs would be higher than what the balance was on the date of filing. that way the creditors could collect $$$ for just filing a claim. But that is not the case. If it were the case, creditors would just continue non-bankruptcy lawsuits to rack up fees. The bankruptcy code is very clear and strictly enforced in this regard. The bankruptcy stays the continuation of the collection of the debt (and hence the collection of the accrual of fees). The bankruptcy discharge creates an injunction against collecting anything related to that debt.

[bornfree2]

Thanks that is reassuring. But cant the same creditor who brought on the lawsuit follow debtor into the BK as a claim later? Are they then letigating the same issue or is it the higher standards that i was reading (fraud, etc). There does not appear to much due process for the debtor in that venue since its just 1 hearing with the judge and not the back and forth that is allowed in the normal district court.

It seems pulling out early to avoid discovery process would reduce liability of any admissions requested. Esp if the admissions they attempt can be crafted to help in a later claim of proof...since the creditor knows the debtor still has the BK option.

On the other hand, letting the lawsuit go all the way to loss judgement has the detrimant of having the judgement on file with the credit report. Or does having a BK allow for clearing that off the record?

Lastly, if the BK fails (dismissed), and the lawsuit resumes and reaches eventual loss (and confiscation and garnish, etc), then the BK cant be reapplied for 6 months correct? Is that seen as abuse of BK?

Im thinking now it would be better to take the default than try to fight and end up in the roughly the same place if the BK doesnt work. As usual trying to estimate the worst possible outcomes to see what doors to take

[justbroke]

Thanks that is reassuring. But cant the same creditor who brought on the lawsuit follow debtor into the BK as a claim later? Are they then letigating the same issue or is it the higher standards that i was reading (fraud, etc). There does not appear to much due process for the debtor in that venue since its just 1 hearing with the judge and not the back and forth that is allowed in the normal district court.

Bankruptcy is about finality. Only a foolish creditor would attempt to open up an adversay complaint and spend thousands trying to defend a dischargeable claim. Just about everything is dischargeable on its face (unless it fits an exception in 11 USC 523). You would be laughed out of bankruptcy court (period).

This is why nearly every case travels through bankruptcy without dischargeability hearings. The time that there are dischargeability complaints or hearings is where there is a general question of law or fraud. For what it's worth, you "could" have a jury trial in the bankruptcy court but they are exceedingly rare.

It seems pulling out early to avoid discovery process would reduce liability of any admissions requested. Esp if the admissions they attempt can be crafted to help in a later claim of proof...since the creditor knows the debtor still has the BK option.

You are way overthinking this.

On the other hand, letting the lawsuit go all the way to loss judgement has the detrimant of having the judgement on file with the credit report. Or does having a BK allow for clearing that off the record?

The judgment would remain on the credit report but show as paid/satisfied or included/discharged in bankruptcy (IIB).

Lastly, if the BK fails (dismissed), and the lawsuit resumes and reaches eventual loss (and confiscation and garnish, etc), then the BK cant be reapplied for 6 months correct? Is that seen as abuse of BK?

A bankruptcy dismissal puts everyone back to where they were before the bankruptcy occurred. However, the clock is then wound forward to the dismissal date and anything that may have accrued (such as interest) will accrue.

Im thinking now it would be better to take the default than try to fight and end up in the roughly the same place if the BK doesnt work. As usual trying to estimate the worst possible outcomes to see what doors to take

You are way overthinking this. Bankruptcy is the nuclear option. You fire it and it decimates all of your creditors (period). Unless you have actual fraud, there is nothing for anyone to complain about.

[bornfree2]

You are way overthinking this. Bankruptcy is the nuclear option. You fire it and it decimates all of your creditors (period). Unless you have actual fraud, there is nothing for anyone to complain about.

Im laughing so hard over this. thanks. im printing this out into a business card will hand it to opposing party. And im going to include the overthinking part FOR THEM. ("Objection, you are way overthinking this... i hold the nukes here") lol

well i suppose i can play their game of chess for a bit and then have my escape pod ready to go.

[justbroke]

Any smart creditor knows this. Even the stupid creditors know that bankruptcy (especially Chapter 7) is the nuclear option. The only creditors that can't grasp the concept are usually "personal" creditors (friends, family members, acquaintances, landlords, and business partners). The penalties are so severe that bankruptcy judges have no problem awarding an $80,000 damages claim for calling a debtor 80 times after the stay was invoked. The judge even considered punitive damages of 3X. They do this to send a message. You don't mess with the bankruptcy stay or the discharge injunction.

[bornfree2]

Any smart creditor knows this. Even the stupid creditors know that bankruptcy (especially Chapter 7) is the nuclear option. The only creditors that can't grasp the concept are usually "personal" creditors (friends, family members, acquaintances, landlords, and business partners). The penalties are so severe that bankruptcy judges have no problem awarding an $80,000 damages claim for calling a debtor 80 times after the stay was invoked. The judge even considered punitive damages of 3X. They do this to send a message. You don't mess with the bankruptcy stay or the discharge injunction.

So I can expect the creditor to dismiss the suit if BK is declared during litigation? Who does the shut down if the BK is successful? I know i have to give notice of the stay, but im researching what is the orderly shutdown so everything is mopped up properly

[justbroke]

Generally speaking, a creditor that has received a notice of bankruptcy will usually self-dismiss any cases pending in the state non-bankruptcy court. There are exceptions. If the State non-bankruptcy case is related to fraud, they'll likely seek relief from the automatic stay in the bankruptcy or pursue a non-dischargeability (adversary proceeding) in the bankruptcy.

The creditor is 100% responsible for not "pursuing" the debt and violating the stay and/or injunction. A creditor is on notice once they receive the Notice of Bankruptcy (actual notice), learn of the bankruptcy (constructive notice), or you tell them (actual notice). As a courtesy some debtors may call the creditor's attorney and remind them of the automatic stay and the bankruptcy.

Bottom line, the mop up is entirely on the creditor. The bankruptcy court will send the Notice of Bankruptcy too all scheduled creditors and the other creditors that you include on the Mailing Matrix. If you ever have issue with a creditor, you write them with certified mail and remind them of the stay. I also tell them that any further 'attempt' to collect or to continue a process to collect (lawsuit) is a violation that will be met with a Motion for Sanctions should they not immediately stop their activities.

[bornfree2]

justbroke thanks. When do you stop being awesome? ;)

This nuke in my pocket now seems like good leverage for the coming settlement talks. I can argue you get 0 or something I can afford. Im young, i can live out a BK on my record. Dont you want to go tell your big-bad-bank client you got something rather than nothing when you submit your bill?

https://www.youtube.com/watch?v=6gQ3SlrAcuo

[justbroke]

Be careful of threatening the use the nuke (bankruptcy). Because a sophisticated (larger) creditor will just "run to the courthouse steps" to get a judgment and file it to make it a judgment lien. That is one of the creditor's weapons... a judgment lien. Now a judgment lien may or may not be dischargeable in the bankruptcy so it's a power play. A sophisticated creditor also knows -- LexisNexis and Equifax Risk Solutions -- generally whether there is property on which a lien could attach. If you have no property or assets the creditor may take other actions, or take fewer risks with the ability to collect.

Many people threaten to file bankruptcy. That just puts the creditor on notice to head to the courthouse and get that judgment lien recorded against all the debtor's property. While the lien may not have any teeth, because it impairs a bankruptcy exemption, it still has teeth. So long as it doesn't fully impair an exemption, those teeth may still sink into your property.

[flashoflight]

Don't give the creditor any hints you are contemplating bankruptcy. They will look for any way to get a speedy default judgment or summary judgment upon learning of your BK plans and then file an abstract of judgment at the county recorder office to go after you.

If they file the abstract of judgment, they can grab your wages and your bank account and put you on top of the pile due to your BK threat. If you have a home, then it becomes a very big mistake since it will attach to all property you have in the county even if you file bankruptcy. You can get rid of it only while the BK is open, but it will cost you legal fees since you can't pro se the case anymore.

I think you need to get a job, move out, and file BK as soon as possible rather than drag this out with the lawsuit creditors. It is Mid-May already. You don't have much time left. The California eviction moratorium (ends June 30) and unemployment expansion (ends Sept) are pretty long in the tooth and there is little appetite for continuing them. I have friends working at $15/hr jobs in California and it is getting hard for some to get enough hours despite what we hear on the news about a labor shortage. As we get further into summer, I expect far fewer job openings as reality sets in that the days of getting paid by Uncle Sam to play video games at home is over. If you don't start getting income for a security deposit, 1st month rent, moving expenses, and maybe a BK lawyer, I hope you have nice parents that will let you move back for free. It will be nearly impossible to rent a place of your own once an eviction shows up on your record. Right now it's VERY easy to get a $15/hr job in California. In most of California, half to 2/3rds of the jobs that were lost by April 2020 have not returned and may never return. Don't squander this narrow window of opportunity to get employed. It won't last.

[bornfree2]

i feel like im in a laundry machine. first the water/debt slowly builds up around me till im drowning...then the big shake up begins as i try to figure out what on earth im going to do..screw, it i cant pay anymore..what they gonna do anyhow...and nothing happens cause the machine stops and my payments to creditors stop...ahh, i guess things are going to be fine as the water drains out. then it all goes quiet..when one day 'knock knock hello i am mr mask man with a paper to give you'...BAM 'summons time'...now its rinse cycle...aahh..what do i do now...bk? ... default...affirmative answers say wut??...then i file an answer with my future rent money...and its stops again...'dont worry bro, you got the NUKES!'...ah ha..now i have it under control....on no..here comes the water again...."get a job, move out, file for bk"...drowning again...then the rinse cycle in full blast mode....weeeee TAKEN TO THE CLEANERS!!

https://www.youtube.com/watch?v=C-m3RtoguAQ

[shipo]

Here's the thing, you've been given some extremely good, valuable even, information (which hasn't changed one iota since you started posting here), and yet all you do is turn around and say, "But what about this and what if I do that?"; rinse and repeat, over and over and over.

To summarize the advice you've been given:

• Get a job
• Save some money
• Get a new place to live
• Hire an attorney
• File for bankruptcy

If you continue your current tactic of delaying, it will all come back to bite you, very hard, in the hind parts.

[yourfired]

GEEZE just file LOL you'll feel alot better once your discharged

[yourfired]

So I can expect the creditor to dismiss the suit if BK is declared during litigation? Who does the shut down if the BK is successful? I know i have to give notice of the stay, but im researching what is the orderly shutdown so everything is mopped up properly

Once your petition is filed, it’s like a viral BLAST that goes out to every creditor that you owe money to. They will know immediately (within 72 hours) of your petition being filed.